The US Senate passed a $1.9 trillion dollar package earlier today. The largest stimulus package in US history is also the largest stimulus package in the world. Part of this package will be funded by the US $1.6 trillion dollar left over from the $4.0 trillion dollars Cares Act package passed last year to provide a backstop to the US economy against the effect of the pandemic. The dizzying levels of stimulus money being injected into the economy is worrying investors. Money managers have started asking for higher rates in order to purchase US Treasury Bonds. While prices of US Bonds fall, banks which serve as primary dealers and other foreign central banks holding US treasuries are sitting on massive losses accounting into billions of dollars.
The latest US bill will provide a $1400 stimulus check to individuals earnings $75000 or less and family households earning $150000 or less. The check phases out sooner compared to the Cares Act passed last year. Income earners above $80000 or household income above $160000 will no longer be receiving any payments in form of stimulus. The upper middle class income earners in the US are expected to also see their tax bills go higher throughout the Biden presidency. Corporate income taxes are also expected to be raised later this year in order to fund the massive deficits incurred by US Government spending. The IRS has yet to provide a timeline for distributing the cash however it is believed that they will be able to start distributing the stimulus check 7 days after being given approval by the Treasury.
US Government spending is thought to be out of control and market participants are trimming their outlook of the US economy. The US is expected to experience higher inflation rate with consumers already facing between 13%-20% increase in prices of goods and services. Foreign countries holding US debt have been actively disposing their holdings in the last 6 months. Speculation is rife that foreign central bank selling of US treasury asset is what is causing interest rates on US bonds to go up, as investors are seeking higher returns for holding US debt. This is not a good sign for the US as it shows waning confidence in the overall US economy and its US dollar currency.